Net Neutrality? There's No Such Thing.

The public versus private dilemma: The term “public good” is based on the much older “common good.” It comes from the traditional English legal term for common land. It refers to resources accessible to all members of a society; these resources are held in common, not owned privately. Therefore, they are also free. If a member of a society does use the resource, he or she pays nothing. Examples of commons apart from common land are air, international waters and, according to some people, habitable earth.

The term “public good” is a nuance of “commons.” Their supply generates costs, but their consumption is (somewhat) free. Typical examples are public parks, defense or, yes, broadcasting. The difference between a common and a public good is that the common good does not cost anything to produce, whereas the public good does. Their similarities are that their use is generally free of cost and that they do not belong to any private entity. Common- and public-good economics, based on this, makes a semi-normative claim about these goods: they are both non-excludable and non-rivalrous, in that individuals cannot be effectively excluded from use, and use by one individual does not reduce availability to others.

Economics has a rather unfavorable view of common and public goods. Since they are supposed to belong collectively to the community and are free of charge to consume, commons and publics are usually abused—and there is also a great deal of free riding. Why is this? Because leaving the cost of maintaining something to the collective is tantamount to leaving it to nobody. Collective responsibility is contrary to individual responsibility. And being free of charge, commons and publics are a boon for free riders. Keep in mind: just because something is free, it does not mean that its creation or maintenance does not come with costs. That is the problem of common and public goods: their maintenance still bears costs and, more often than not, the community cannot summon enough means for compensating use and abuse. Generally, publics and commons ends in a state economists prefer to call a tragedy.

Naturally, there are possibilities for the social management of common and public goods. But usually, social management is pretty coercive. Most of the time, it means that every participant of common or public goods has to put in some work for it. And try to apply it to the net: does that mean that everyone should have a duty to expand broadband and manage it? This is hard to believe and much harder to implement.

Of course, government is the last resort in trying to avoid the tragedy of common and public goods. But government will use taxes to provide for common goods and at the same time to provide for its own institutions. These taxes are usually higher than the private production of a similar private good would cost. And it is more effective, too. A tax has to be paid by everyone, regardless of how much the public good is used. Private production follows individual interests, as users want to use the private good.

Again, applied to the internet: would this mean that the government should expropriate all private investors that have built the web so far? And then what? Will taxes for social programs or defense be used to build broadband? Or will there be tax increases? The theoretical solutions to all public-good problems are usually more complicated than the problem itself.

Is it then a mistake to imagine the internet as a common or public good (remember, this is the intellectual cornerstone of net-neutrality advocates and of the FCC’s ruling)? Yes, it is. In reality, there are two faults within the same claim. The first is a fundamental error in economic reasoning. The second is a more preoccupying normative claim disguised as a factual statement.

Bad—and good—economics: The free-of-charge use of some of its applications doesn’t make the whole internet a public good. Granted, there are many free places in the web, and even in its infrastructure: think of forums, newspapers, magazines and even games—as well as free hotspots, free broadband, free data packages. But usually, the nonpaying consumer is paying for the used service in another way, whether by willingly becoming the target of advertising, or by making a particular page more attractive in accessing it, or by sharing data with the service’s provider. For the infrastructure provider it is even simpler. Diversity of users brings traffic, and traffic is good news. Also, most web users pay flat rates, and other prices that are not directly linked to the traffic they generate. So, there is already a price for using the web, which makes it a private good. The internet is like the proverbial free lunch: there is almost never one.